Record rise in household bills

RISING oil prices last month pushed up household utility prices at the fastest rate since records began in 1997, official figures showed today.

The price of water, electricity and gas leapt 4.4% on a year earlier. Further price pressure came from package holidays and food, the Office of National Statistics said.

Overall, the Consumer Prices Index showed inflation in October picked up to 1.2% from 1.1% a month before. The figure was in line with what the City had expected.

The gain in the CPI would have been higher if it were not for falling clothing and footwear prices, the ONS said. These items have had a downward effect for most of the year.

A spike in oil prices above $50 a barrel this year has had an obvious knock-on effect on petrol, pushing the price of unleaded to around 85p a litre and is now filtering through in the form of higher fuel costs for homes. British Gas, Powergen and Scottish Power are among those to have announced hikes in electricity and gas bills in recent months.

Despite the rise in October, inflation remains only marginally above the 0.9% level that would require Bank of England Governor Mervyn King to write to the Government to explain why inflation is so far below its 2% target.

The Bank's Government-set objective is to set rates so that inflation does not rise above its target for two years. It has raised rates to 4.75% from a low of 3.5% last year in a bid to cool the UK's overheated property market and keep a lid on future consumer prices.

With inflation so low and signs that the UK property boom is now over, economists have speculated the base rate may not need to rise further and may fall in the new year. A survey today from the Royal Institution of Chartered Surveyors revealed house sales were at a nine-year low in October.

Simon Rubinsohn, chief economist at broker Gerrard, is expecting inflation to rise faster than the Bank expects over coming months. 'For the time being, we are sticking with our view that the interest rate cycle has yet to peak,' he said.

Economists will now eagerly await UK unemployment figures tomorrow and the publication of minutes from the Bank of England's monetary policy committee meeting two weeks ago when rates were held again at 4.75%.